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Tuesday, November 29, 2011

Payer-Provider Lines Blur -- Another Trend in Health Care

Have you noticed that the line between payers and providers is becoming blurred? More insurance companies now own groups of providers. There are numerous examples, but I’ve been paying particular attention to UnitedHealthcare’s launch of hi HealthInnovations -- a fully owned subsidiary that is providing steeply discounted hearing aids to some of its’ Medicare members as well as offering direct to consumer sales. Other examples include Humana’s purchase of Concentra, a Texas-based provider of stand-alone medical centers. Wellpoint recently acquired CareMore, a health plan operator that owns a number of clinics in the Los Angeles area. CIGNA controls a Phoenix medical group. There are flip side examples too, Partners HealthCare System Inc, a large hospital and physicians network in Massachusetts, acquired Neighborhood Health Plan, a Boston-based nonprofit insurer with 240,000 members. I found this article on the topic particularly interesting, Managed Care Enters The Exam Room As Insurers Buy Doctor Groups.

Why the shift? Healthcare reform is minimizing profits, so insurance companies are diversifying. The Affordable Care Act limits the portion of premium dollars that can go towards administrative costs and profits. This year, a provision requiring insurance companies to spend 80 to 85 percent of premium dollars on medical care and health care quality improvement, rather than on administrative costs went into effect. In 2012, insurance companies will be required to provide a rebate to their customers if their profits exceed the mandated percentage. Insurers are also under constant pressure from employers and other customers to minimize premium increases. If the insurance companies own the provider groups, they have more control over the costs. When I attended the United Healthcare’s Customer Forum last June, they mentioned that they were introducing a HMO in Florida at the request of some of the employers they work with. The thinking seemed to be that these employers would prefer to provide a limited HMO benefit to their employees than no benefit at all. Actually owning the provider groups doesn’t seem like such a huge leap from a HMO. Look at Kaiser as another example. And, isn’t that what is happening with the trend toward ACOs, Accountable Care Organizations. Some are being initiated by large physician groups, some by hospital systems, and others by health insurance companies. Humana, United Healthcare, and Cigna have all announced plans to form their own ACOs.

What impact will this have? Time will tell. Insurance companies controlling the providers might drive costs down, but ACOs could push costs up. As hospitals join forces with physicians and gain market share, they may have more leverage in negotiations with insurers. Benefits may become available to more people through delivery models like United's hi Healthinnovations, but consumer may have fewer choices of providers and durable medical suppliers. Americans typically place a high value on choice, but with 50 million people uninsured (16.3 percent of Americans) something has to give. Especially when you consider the fact that the percentage of people covered by employer-based health insurance has declined while the number of people covered by Medicare and Medicaid has increased.